The recently amended Broad Based Socio Economic Empowerment Charter for the South African Mining Industry (hereafter referred to as the "Mining Charter") was unveiled by the Minister of the Department of Mineral resources ("the Minister") on 13 September 2010. It appears at first glance that the vision behind the country's Mining Charter to achieve a globally competitive mining industry that can benefit all South Africans and "to facilitate transformation, growth and development of the mining industry" has been achieved. However, we may be faced with certain regulatory challenges not addressed by the Mining Charter, but which would have to be addressed in the soon to be amended Mineral and Petroleum Resources Development Act of 2002 the ("MPRDA").
One of the key objectives of the Mining Charter was to achieve 26% ownership of Historically Disadvantaged South Africans ("HDSA") in mining companies by 2014, which is an objective that remained unchanged in the revised Mining Charter. The Mining Charter requires black economic empowerment ("BEE") beneficiaries to have "full shareholder rights" and ownership shall vest within the timeframes agreed with the BEE entity, taking into account the marketing conditions. In addition, the revised Mining Charter specifies that mining companies were allowed to offset up to 11% of their HDSA ownership requirements against the value of their beneficiation activities.
Mining companies are now required to procure 40% of their capital goods from HDSA-owned suppliers by 2014. In addition the revised charter lay down that multinational suppliers of capital goods are required to contribute a minimum of 0,5% of their locally generated annual income towards a "social development fund" for the benefit of local communities, as well as procure 70% of services and 50% of consumer goods from BEE entities by 2014. The Mining Charter makes provision for sustainable growth in the mining industry in that there be a considerable improvement of the industry environmental management, health and safety, and skills.
The continuing consequences of all previous deals concluded prior to the promulgation of the MPRDA would be included in calculating such credit/offsets in terms of market share as measured by attributable units of production. The consequence of non- compliance under the new revised Mining Charter, is that companies found not complying could face penalties including the revoking of a mining company's license. Another point of contention is that the Minister may amend the Mining Charter as and when the need arises. No further explanation is provided as to how, when and why such amendment could occur, thus leading to unease and fear of arbitrary decisions.
As part of transforming the industry, the department has placed a six-month moratorium on all new applications for prospecting mining licenses. The moratorium, which took effect from 1 September 2010, will allow the departments to review gaps and inefficiencies in the administrative process.
The next step for the Department of Minerals and Resources is to bring the codes of good practice, which were suspended last year after their release and subsequent condemnation by the mining community, in line with the Mining Charter. Furthermore, the Minister has promised urgent amendments to the MPRDA before the end of the year to address a number of ambiguities and gaps.